EUR/USD Exchange Rate Forecast to Grind Lower by CIBC + Other Views

The euro remains attracted to the $1.1100 support area as the market prepares for the announcement of the FOMC monetary policy today.

The EUR to USD pair continues to drift lower, yet it still retains the majority of the gains registered following the ECB meeting from last week.

Momentum indicators in a number of timeframes are therefore still pointing higher and advocating for more gains.

On the fundamental front guidance will be provided by the US Federal Reserve's policy meeting due on Wednesday.

With many arguing the ECB is at the limit of its abilities movement in EUR/USD could now be in the hands of US decision makers.

Nevertheless, the charts reflect the technical structure of the markets and therefore hold real-life implications for future direction in the exchange rate.

That is why we sound out the latest views of the leading technical analysts with the view of decoding where the most likely steps in the EUR to USD will be.

As always views are mixed, but these views allow the reader to take on board different opinions and arrive at independent opinions.

The 'Euro / Dollar Lower' Camp

Richard Perry at Hantec Markets says the pair has lost that bullish feeling as momentum indicators die:

"The euro remains attracted to the $1.1100 support area as the market prepares for the announcement of the FOMC monetary policy today. I continue to see the pivot band $1.1050/$1.1100 as the watershed for the bulls and a breakdown would turn the medium term outlook neutral once more within the $1.0800/$1.1050 range.

"Momentum indicators have just lost the upside impetus of the post-ECB spike higher and is appears likely that traders will be sitting on the fence ahead of the FOMC."

Jeremy Stretch at CIBC says rate spreads are likey to feed into a weaker euro:

“The single currency continues to head back towards the 200-day MAV versus the USD at 1.1043. With the data calendar remaining relatively empty and little ECB rhetoric expected in the near term we would argue that implied rate spreads moving back towards the US points towards EUR USD continuing to grind lower.”

Yann Qelenn at Swissquote Bank SA says a decisive break below the 1.10 support line is inevitable:

“In the longer term, the technical structure favours a bearish bias as long as resistance holds.

“Key resistance is located region at 1.1453 (range high) and 1.1640 (11/11/2005 low) is likely to cap any price appreciation. The current technical deteriorations favours a gradual decline towards the support at 1.0504 (21/03/2003 low).”

The CitiFX Flows team points to hedge funds & real money accounts selling EUR post-ECB and the medium to longer term outlook continues to point to a decline
while any short term gains are seen capped at 1.1350–1.14.

The 'Euro / Dollar Higher' Camp

Karen Jones at Commerzbank says some upside is still available:

"EUR/USD remains well supported circa 1.1060 the December high. Recent volatility led us to neutralize our immediate outlook as we suspect that the market is simply back in the middle of a rather large range. Overhead lies the seven month resistance line at 1.1314 and also the February high at 1.1377, while these could be reached, the market is expected to then struggle.

"Further up lurk the September and October highs at 1.1460/95. To gain any traction on the down side, we will need to see a close below 1.0808. For now intraday Elliott counts are positive above 1.1060/20 and we will buy the dip."

The CitiFX Techncials team point to EURUSD having staged a weekly close above the 1.1045/60 area and the short term technical picture still looks constructive with next resistance seen at 1.1210 (overnight high) followed by 1.1318 (daily resistance trend line).

Ralf Umlauf at Helaba Bank says there are still signs of life for the bulls to latch onto:

"From a technical perspective, the intact buy signals from the MACD and Stochastic are worth noting. Moreover, there are no signs of an overbought market situation despite the upturn in price movements last week.

"However, the euro's failure to firm above the 61.8% retracement (1.1166), leading to a test of the 50% level (1.1101), suggests caution. Further resistances are seen at 1.1219 and 1.1250. Supports are found in the region of the 200-day moving average (1.1044) and around 1.10. Our favoured trading range: 1.1044 - 1.1219."